Electric Vehicles in India – Trends and Future Outlook

With the entry of Tesla in India, the buzz of electric cars, which was somewhere lost in the pandemic, has returned. Although the intensity would vary greatly across geographies, there is little doubt about the pandemic slowing the pace of electric vehicle adoption. Especially in India, the pace and focus on infrastructural development could not be retained. The reduced oil prices led to a lowered cost of ownership for the Internal Combustion Engine vehicles, diminishing the attractiveness of EVs. Decreased consumer purchasing power only added more fuel to the fire.

The demand trend, though, has been inconsistent in the International markets. For example,

• In China, the demand recovery was quicker than expected.
• In Europe, the momentum is positive and the governmental push for emission regulations is bound to increase sales.
• On the other hand, the US market has been showing signs of stagnant sales and market shares consistently below pre-crisis scenarios.

Indian Automotive Market - Snapshot

Indian automotive market is the fourth largest in the world, growing at a CAGR of 6.5% and expected to cross Rs. 16-18 trillion by 2026. The electric car market in India, alone, will amount to Rs. 50,000 crores by 2025, therefore, deserves attention. The government has been very supportive through schemes like Automotive Mission Plan, Faster Adoption and Manufacturing of Electric Vehicles (FAME), GST, Incubation centres for start-ups in the EV space, etc. Apart from that, the public sector, railways, and many ministries have come together to develop infrastructure for electric vehicles.Such huge market possibilities and positive government support are not
going unnoticed by automotive players. Right from two-wheelers to premium luxury cars, OEMs, Suppliers, and Mobility Service Providers are betting big on India. Through investments in their core businesses or acquisitions, they are all trying to build or augment their EV capabilities.

• Volvo plans to assemble hybrid electric cars in India, and scale its market share to 10% by 2020 in the luxury car segment.
• MG has partnered with Tata Power to set up superfast chargers for Electric Vehicles at select MG dealerships.
• Ola Electric Mobility acquired Etergo BV, a manufacturer of electric scooters.
• Tata Autocomp, on the other hand, signed a joint venture with a Beijing-based company Prestolite Electric to enter the EV components market.

The automotive industry was in a slowdown since the third quarter of 2018, way before COVID hit us, mainly due to liquidity crunch and weak customer sentiments. Now, post the pandemic, in 2021, due to macroeconomic reasons and consumer behaviour shifts, both OEMs and Mobility players will continue to face challenges.

The two-wheeler segment, though, seemed to be doing much better during the pandemic. Y-o-Y growth reported by ET Auto during October 2020 saw a 16.88% increase in domestic sales and a 40.14% increase in domestic production. That reflects a robust demand. A portion of this growth can be attributed to the rise of e-commerce and the last mile delivery in the rural and semi-urban markets, and increased demand for grocery, medicines, and food delivery in the urban markets.

These small formats (2-wheelers and 3-wheelers) will have significant cost advantages in e-mobility over internal combustion vehicles. OEMs should encourage growth in this segment by creating more affordable and performance-driven options. A major point of focus should be enabling battery swapping to address the concerns of range and battery life. Some start-ups in India, like Sun Mobility, are already operating to address these challenges.

EVs will also be useful for Mobility Service Providers who depend on four-wheelers. They need to innovate in terms of business models like introducing self-drive rentals, leases, etc. to stimulate growth. EVs would reduce the operating costs and increase drivability for them. It will also allow for seamless integration of electronics and telematics.

Given the market potential, OEMs must also invest in developing their EV manufacturing capabilities. That brings us to the question of supply chains. EV components may or may not be supplied by the existing suppliers for the OEMs. In such a scenario, they will need to get into a contract with new suppliers, located in foreign countries. While a longer contract is usually offered to build trust, there is an inherent need to digitize the supply chains with technologies like Blockchain and IoT. It will help these OEMs reduce costs, remain agile, and increase their productivity through real-time tracking, facilitating manufacturing plan adjustments, maintaining optimum inventory levels, and meet delivery deadlines. This is also an opportunity for the OEMs and Mobility Service Providers to work in collaboration and discover newer capabilities. The purchase of personal vehicles may take time to recover, while the B2B segment is growing and has strong demand. Apart from that, the go-to-market strategy has to be reimagined since more Indians are willing to buy high-value items like a vehicle online. A seamless omnichannel experience is the basic need of the hour now so that customers can switch, without hassles, among modes during their buying journey. The future of electric vehicles in India is promising. With government support, a young population that will adopt innovative business models like vehicle subscription, and strong B2B demand in businesses like e-Commerce, all the factors seem to be in place.

But the major piece remains missing - A well-developed infrastructure to efficiently support the EVs.